Author Topic: Local student slum lord or vacation destination rental?  (Read 2887 times)

BradMM

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Local student slum lord or vacation destination rental?
« on: December 28, 2014, 07:00:00 PM »
Just found this place and my first post.  Wife and I both have worked for the State for years (moderate income but frugal) and have a lake house that we bought outright in 2010.  Kids left the area so don't use lake house.  Live in college town but travel in Caribbean every year.  I haven't gotten down to running the numbers yet but we're selling the lake house and are looking at either moving the $$$ into a local rental for students or a vacation home that would be rented out when we're not there. 

Wife LOVES redoing houses so that would be a plus for her but I'm inclined to go "bigger" and get the vacation place that we could use.  I'm a diver (she used to be, hopes to resume) so we would use it for sure.  Close to retirement so will only work another couple of years.  Could leave now but need something to do when I get up in the morning.

Any general thoughts?

Brad

NEMPLS

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Re: Local student slum lord or vacation destination rental?
« Reply #1 on: December 28, 2014, 07:59:21 PM »
BradMM,

Why not just rent out the lake house? If you didn't use the lake place will you actually use the Caribbean home that is further away?

It's hard to know how to answer your question without a complete financial picture. If it were me I would sell the lake house, Invest in good index funds or whatever would be appropriate with your current retirement situation. If you sold the lake house for 200,000, invested in index funds that could return a moderate 5% then withdrew 4% per year you would have:
A.) Your original 200,000
B.) 8,000 per year to vacation with.
C.) An extra 2,000 per year from the extra 1% difference between the 6% return and the 4% that you take out. By the way, you would also tack this 4,000 on to the 200,000 so the second year you would have 202,000 which means the 4% you withdraw in the second year would be worth 8,080 and so on for ever as long as the market is fine. If the marked dips take less than 4% so that your principal always stays above 200,000 and is growing.

Different strokes but I wouldn't touch rental property at age 60 with a 10 foot pole.  I'm 54 and at an age where I could walk away from work without looking back and live the Mustache life. My only goal at this point is to not screw up what I have accomplished so far.

Best of luck with whatever decision you make.

malacca

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Re: Local student slum lord or vacation destination rental?
« Reply #2 on: January 01, 2015, 12:42:58 PM »
Slums are always more profitable.

Vacation rentals are often vacant - as everyone wants to be in the business.

Take profit from slum and stay in a nice place on your vacation.


Fishingmn

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Re: Local student slum lord or vacation destination rental?
« Reply #3 on: January 03, 2015, 05:10:59 AM »
I think malacca is on the right track.

I like local investments better. My only comment is that I'd probably lean toward something a little nicer that will attract a better and longer staying tenant than student housing.

malacca

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Re: Local student slum lord or vacation destination rental?
« Reply #4 on: January 03, 2015, 03:11:34 PM »
Depending on how much time you want to put into the property, student housing can be a gold mine.

As you often cram 4 into a house and each pay 4 or 500 - the return is good. But you do have more turn over as students move around often.

Same property wouldn't bring in near as much if rented long term.

arebelspy

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Re: Local student slum lord or vacation destination rental?
« Reply #5 on: January 03, 2015, 09:59:19 PM »
Same property wouldn't bring in near as much if rented long term.

It wouldn't gross nearly as much.

Whether or not it would net more depends.  Often it's the case that it doesn't, especially if you aren't self-managing.
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Fishingmn

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Re: Local student slum lord or vacation destination rental?
« Reply #6 on: January 04, 2015, 06:21:42 AM »
Depending on how much time you want to put into the property, student housing can be a gold mine.

As you often cram 4 into a house and each pay 4 or 500 - the return is good. But you do have more turn over as students move around often.

Same property wouldn't bring in near as much if rented long term.

Do check local housing laws if doing this. I was considering student housing years ago when my DD was at the U of MN but Minneapolis only allows 3 unrelated parties in any rental. Many landlords ignore this but that's just an exposure for liability.